Market levers that drive business value

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Most business owners understand the importance of building value in their business. What they may not know, however, is that there is a simple operational assessment that can predict a company’s current value now and what that value could be if inefficiencies and problem areas were addressed — a value gap. It got my attention.

People who are much smarter than I am have gathered the big data that drive this assessment tool, which is based on a methodology born at MIT and Harvard Business School and has been vetted and actively promoted by the National Association of Certified Valuators & Analysts, the National Institute of Standards and Technology and the International Exit Planning Association.

Of the 18 value drivers, 10 are market-based drivers, broken down below.

Growth. This driver is focused on company growth, industry growth and how a company’s products and services will continue to effectively provide for and service future growth.

Large market potential. This centers on market size, the clarity of a company’s niche, competitive benchmarking and the company’s understanding and forecasting of market growth trends.

Dominant market share. This concentrates on how clearly a business can delineate its share by product, service or region, along with its market share ranking and how well positioned a company is to grow and/or maintain its market space.

Recurring revenue. This driver factors contracts with customers for income continuation, customer longevity and customer diversification.

Barriers to entry. This driver’s focal point is on the significance of legal, regulatory, market or capital-intensive barriers and how a company has created its own barriers to entry through brands, licenses, trade secrets, exclusive agreements, locations, etc.

Customer diversification. At the core of this driver is showing customer diversification based on income concentration, a company’s ability to prove its viability to continue serving its current customer base and projections for furthering its diversification.

Product differentiation. This driver assesses proof of a company’s product/service differentiation, the product/service lifecycle and a company’s ability to achieve cost advantages tied to that differentiation that results in superior gross margins.

Brand. This rallies around a company’s brand awareness, its brand advantage in the marketplace and how well it has protected its brand assets, such as its logo and trademarks.

Sales and marketing. This driver is jam-packed and assesses everything from a company’s sales and marketing objectives, plans and processes to research, customer contracts and measurement of marketing metrics.

Company overview. The company overview comes down to how well a company communicates its story, its web presence, the strength of its defined market, competitive knowledge, its strategic direction, leverage of trusted advisers and its culture.

The assessment has a proven track record of success for helping business owners see the value gap — in real dollars — to understand what is needed to grow the value of the company. ●

Kelly Borth is CEO and chief strategy officer at GREENCREST

Kelly Borth

CEO and chief strategy officer
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